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Helpful Hints and Easy Calculations

Home » Real Estate » How Much House Can I Afford? » Helpful Hints and Easy Calculations

Buying a home doesn't have to be so hard with this list of helpful hints and practical calculations to determine what you can afford.

• If you are not sure how "comfortably" you can afford a certain home, try estimating what your monthly payments and costs would be for that priced house and then live for three months on those terms.
• Look for houses that are priced less than you can afford. Real estate agents will often show you homes slightly above your price range, so if you can afford a $200,000 home, tell them you can only afford a $150,000. That way if they show you a $195,000 home that you absolutely adore, you know that you can realistically afford it.
• Do not buy a house that is more than 2 ½ times your CURRENT salary. Never calculate figures using what you think you may earn one day.
• Your monthly mortgage payment (including taxes, insurance, etc.) should not be more than 28% of your monthly gross income (gross is before taxes). To determine this number multiply your annual salary by .28 and divide by 12.
• To determine the maximum house price that you can afford multiply your annual salary by 2.5, this will give you a general ballpark figure to begin thinking on.
• Make good use of your internet resources. There are host of internet websites that have calculation pages where you can insert your information and get a more exact figure on what you can afford and how much of a loan you are likely to be offered. (www.bankrate.com)
• Keep up good credit. It seems like this would be a no brainer, but many people pay little attention to their credit history or credit score. Along with being responsible and on-time with bills and payments, make sure you are keeping an eye on your credit so that a case of stolen identity or credit card fraud doesn't ruin your chances of buying a home.

Owning a home can be a wonderful and fulfilling experience, but over-stretching your income can lead to frustration and stress. Stay within your limits, make smart choices, and weigh all your options and you should be on your way to owning, enjoying and comfortably affording a new home!

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